The effect of board structure on firm value: A multiple identification strategies approach using Korean data

Bernard Black and Woochan Kim ()

Journal of Financial Economics, 2012, vol. 104, issue 1, 203-226

Abstract: Outside directors and audit committees are widely considered to be central elements of good corporate governance. We use a 1999 Korean law as an exogenous shock to assess whether and how board structure affects firm market value. The law mandates 50% outside directors and an audit committee for large public firms, but not smaller firms. We study this shock using event study, difference-in-differences, and instrumental variable methods, within an overall regression discontinuity approach. The legal shock produces economically large share price increases for large firms, relative to mid-sized firms; their share prices jump in 1999 when the reforms are announced.

Keywords: Korea; Outside directors; Audit committee; Corporate governance; Board of directors (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (131)

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Working Paper: The effect of board structure on firm value: a multiple identification strategies approach using Korean data (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:104:y:2012:i:1:p:203-226

DOI: 10.1016/j.jfineco.2011.08.001

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